The federal government recently announced that it will allow the sale of Nexen Inc. to CNOOC Ltd., the oil company owned by the Chinese government. The time it took for Canada to make its decision and the substance of the decision reflect ambivalence – an ambivalence that the C-Suite survey shows is clearly shared by Canadian business. Economic realities seem to be in conflict with geo-political realities, and it is not clear how to reconcile them.
On the economic reality front, business leaders have a pretty clear view. There is close to unanimity that the United States is in decline as an economic power. While executives do not foresee the United States being eclipsed as our major trading partner in the immediate future, that transition is seen to be in progress already.
The most common view is that American importance to the Canadian economy is waning and that the U.S. influence on our economic fortunes will be less in five years than it is today. Almost to a person, Canadian executives think that future prosperity for Canada depends on us understanding the decline of the United States and supplementing the U.S. market with other markets.
Most executives also think that both India and Latin America represent strong possibilities for Canadian exports and should be high priorities for expanding trade. However, executives clearly think that China is the big player in the global economy and cracking that market needs to be the highest priority.
Two things complicate that economic reality. First, opening China to Canadian exports is going to be a challenge. Executives think the United States welcomes Canadian investment and exports, while China is seen as among the least open markets in the world to Canadians.
Second, executives are not sure how they feel about trade and investment with China. On one hand, they see it as the big prize economically. On the other hand, Canadian business thinks we should favour democratic countries on trade and investment issues. Underlying all of that is the understanding that the U.S. decline and the rise of China signals enormous change in the world power structure that Canadians, including those in the business community are not entirely comfortable with.
While most executives think the CNOOC bid was positive on balance, there is little enthusiasm for it, and outside the oil-producing provinces there is significant opposition to it. The No. 1 concern that executives have about the Nexen deal is that CNOOC will use it to advance the interests of the Chinese state – that CNOOC is not a normal company but an instrument of statecraft. For that reason Canadian business leaders believe that offers to purchase from state-owned enterprises need significantly more scrutiny than companies owned by private interests.
The concern that existed, and exists, was not about the sale of Nexen. It was about the purchaser. Had the offer come from a U.S.-based company, concern among Canadian business would largely have evaporated. The combination of China, a state-owned enterprise and oil – our most strategic asset – made this purchase a harbinger of things to come. The Canadian government has obviously not figured out how to articulate net benefit in a world where our economic interests seem in conflict with our geo-political interests.
This time economic interest prevailed, but this debate is not over.